Small builders in the UK see costs soar due to Brexit
A third of small building firms in the UK say that soaring material prices are squeezing their margins and almost a quarter have had to pass these price increases onto consumers, new research shows. They are blaming Brexit as a range of prices of materials are affected by the depreciation of Sterling following the referendum vote to leave the European Union, according to the report from by the Federation of Master Builders (FMB). Growth in the construction sector is also being affected with the latest official figures showing that prices have increased at one of the sharpest rates since the first half of 2011 and July saw the weakest construction performance since August 2016. The IHS Markit/CIPS construction survey shows that a number respondents cited delays in decision making by clients, linked to worries about the economic outlook and heightened political uncertainty. While residential building remained the strongest performing category of activity in July, the latest rise was the slowest for three months. The only upturn in output growth was recorded in the civil engineering sector. Construction firms also commented on a greater reluctance to commit to new projects among clients in July. The FMB report shows that timber prices have risen then most, followed by insulation, bricks, blocks, windows, plasterboard, boilers and radiators and them porcelain products and it adds that the impact of these material price increases have been wide ranging. Some 85% of builders think material price rises could drive consumers to hire rogue traders in an effort to save money on their building projects, 32% have had their margins squeezed, 22% have been forced to pass material price increases onto their clients, making projects more expensive for consumers and more than one in 10 builders report making losses on their building projects due to material price increases. ‘Material price increases have left builders under severe pressure. This research shows that following the fall in the exchange rate, timber is the material that the majority of builders say has increased most in price but the problem doesn’t end there as everything from insulation to windows to bricks and blocks are soaring in price,’ said Brian Berry, chief executive of the FMB. He also pointed out that a third of builders report that these price increases are eating into their already razor thin margins and this is on top of increased wages and salaries stemming from long term construction skills shortages. Furthermore, one in 10 builders say that they’ve actually made losses on projects due to material price increases and this is most likely to happen when a particular product or material jumps up in price mid-project when then builder has already quoted for the work. ‘Perhaps unwisely, some builders are absorbing these extra costs as opposed to re-quoting for the project. But material price spikes aren’t just a problem for builders, they’re also a problem for the home owner, with almost one quarter of builders saying that they have had to pass on price increases to their clients,’ Berry pointed out. ‘This means that building projects now cost significantly more than they did this time last year. What with stagnant wages and price inflation across the economy, consumers are feeling the pinch and it might be that they decide not to commission that loft conversion or extension after all,’ he explained. ‘Worse still, 85% of builders believe that home owners will be tempted to hire rogue traders who are quoting a lower price than a professional building firm such as those that belong to the FMB. If that’s the case, material price rises could lead to a flurry of botched jobs and distressed consumers,’ he added.
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